Indonesian coal miners are struggling with slow demand this year, as companies in India, one of the country's major coal markets, are hitting the brakes due to a prolonged lockdown to contain the outbreak of COVID-19, data firm said.
South Asian coal imports, a product mainly used for power generation, are expected to fall by 19.1 percent year-on-year (YYY) to 149 million tonnes, according to IHS Markit.
As demand in India slows, IHS Markit projects a 10% decline in Indonesian coal exports to 406 million tons this year, compared to 451 million tons last year.
IHS Markit Coal, Metal and Mining Senior Director James Stevenson said India 's lower import forecast was the result of slumping industry and industrial activity during the country's prolonged lockdown.
“The real change came with the lockdown in India. India, of course, is a pretty big market for Indonesian coal, [and] we now expect India to reduce its imports by about 35 million tons,” James told The Jakarta Post via phone call last Friday.
Initially, Indonesian coal exports were estimated at 419 million tons before India declared an extended lockdown and before market conditions deteriorated in Southeast and East Asia, which are Indonesia's other major coal export markets.
India went to a lockdown on March 24, when most companies were shut down. The nation extended the lockdown four times, with the latest declared on Sunday and scheduled to last until 31 May.
“But also, once the lockdown officially ends, it’s going to take a long time to restart the economy,” James added.
Indonesia is the world's largest producer of coal and dry fuel contributes 14 percent of the country 's exports, according to statistics from Indonesia (BPS).
Indonesia's trade balance reported a deficit of US$ 350 million in April, with exports falling 7.02 per cent on the back of declining commodity prices and global demand plummeting as a result of the pandemic.
Indonesia's two most successful coal miners last year, privately owned PT Adaro Energi and state-owned PT Bukit Asam (PTBA), previously highlighted India's lock-up as major risks to the second quarter, apart from declining local demand.
The executives of Adaro and Bukit Asam stated that the companies would redirect their exports to other markets in South East and East Asia.
"India's lockdown has resulted in lower sales to India. But the Adaro market is widespread, so we could divert sales, "said Garibaldi" Boy "Thohir, president of Adaro.
Adaro shipped 19 per cent of its first quarter of production to India. The company also shipped to China, East Asia, South East Asia, including Indonesia and other markets such as New Zealand, Pakistan and Europe.
The miner’s profit shrank 17.36 percent yoy to $98.17 million in the first quarter amid falling coal prices and slumping demand in Asia.
“PTBA can still sell to India but only via private harbors whose numbers are not that great,” said Bukit Asam commerce director Adib Ubaidillah previously.
Adib added that PTBA was looking at other Asian markets, such as Brunei, Hong Kong , South Korea, Thailand and Vietnam, as potential export destinations.
The latest quarterly financial report by PTBA showed that the company's income dropped by 20.5 per cent annually to Rp 903.24 billion between January and March.
Data from India's state-owned electricity dispatcher, POSOCO, show that coal generation plummeted 32% at the end of March, when the nation collapsed. At the same time, the generation of gas and renewable energy, driven by hydropower, has begun to increase slowly.
